Will Bitcoin "die loyalists" under the DeFi boom still have unexpected gains?
Editor's Note: This article comes fromGolden Finance, reprinted by Odaily with authorization.
Editor's Note: This article comes from
Golden Finance
Golden Finance
For the blockchain and cryptocurrency industry, 2020 is destined to be an extraordinary year, with many unexpected events happening one after another: the global financial market collapsed due to the new crown epidemic, the Bitcoin block reward was halved, and the DeFi boom emerged, etc. And the new crown virus epidemic at the beginning of the year has affected many countries around the world, including the United States.
However, in the turbulent financial market, one of the world's top hedge fund managers got a windfall on Bitcoin, that is, the founder of New York fund giant Tudor Investment Corp.: billionaire Paul Tudor Jones ( Paul Tudor Jones). It is worth mentioning that Paul Tudor Jones did not "specially" invest in Bitcoin at first. In his own letter written in May, he said that the reason why he chose to trade a small amount of Bitcoin in his personal account was purely for "Have some fun". But unexpectedly, this "fun" brought Paul Tudor Jones a huge harvest. From January to December 2017, Bitcoin soared from $900 to about $20,000. In a disastrous economic situation, Paul Tudor Jones sees Bitcoin as an investable asset, not only for himself but also for his $9 billion Tudor BVI fund.
Paul Tudor Jones stated that he is neither a conventional miser, nor a blind cryptocurrency speculator, nor is he a millennial who is keen on cryptocurrency investment. He just wants to seize opportunities while protecting his capital from losses in the ever-changing market environment. Based on this idea, he decided to invest in the world's fastest growing currency instrument and to study it more deeply.
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Has certain advantages over gold
While Bitcoin may not be doing as well as it should in terms of credibility, its history is only 11 years old compared to gold's 2,500-year history. In contrast, Bitcoin actually performs better in terms of liquidity, portability, and purchasing power. What better asset to store than Bitcoin, which can be easily stored on your smartphone? And Bitcoin is the only store of value in the world that can truly be transacted 24/7. Additionally, it is the only large tradable asset in the world with a fixed supply. Because the algorithm design of Bitcoin sets a limit of no more than 21 million BTC for the total amount of Bitcoin, and the existing 18.5 million Bitcoins in circulation in the market also fully embodies the essence of the scarcity premium, which makes Bitcoin more and more rare And precious, this is also a concept that the central bank and the government currently cannot think of.
Not only that, Paul Tudor Jones also believes that Bitcoin is cheap, the market value of Bitcoin is only 1/1200 of the market value of financial assets, the value reserve is 66% of gold, but the market value is 1/60 of the value of outstanding gold.
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Warren Buffett once called Bitcoin "rat poison"; JPMorgan Chase CEO Jamie Dimon also regarded Bitcoin as a "fraud"; the U.S. government, inspection agencies Bitcoin and financial industry regulators have also taken a less favorable view of Bitcoin, arguing that it has a history of money laundering, hacking, market manipulation and criminal activity.bitcoinAlthough six years later, HSBC has also begun to use the blockchain to provide record-keeping support for the $20 billion asset digital vault, but many investors are still skeptical of cryptocurrencies, and the era of regulatory crackdown It's far from over.
Not only that, but Jay Clayton, chairman of the US Securities and Exchange Commission, has also described cryptocurrencies as a tool that threatens the hegemony of the US dollar. Jay Clayton, who has been a vocal antidote to cryptocurrencies since taking charge of the SEC in 2017, does not wish to clarify or adjust the SEC regulatory framework to suit
bitcoin
or any other crypto-related product. Jay Clayton believes that it is precisely because the US Securities and Exchange Commission has always adhered to and abided by these "rules of the ancestors" that it has created an enviable securities and financial market. Although some people think that the US Securities and Exchange Commission can make some adjustments and updates in the rules after entering the 21st century, Jay Clayton is completely unmoved.
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The market acceptance is getting higher and higher
The U.S. Securities and Exchange Commission does have a lot of concerns about Bitcoin, and it also gave three major reasons for the inability to introduce Bitcoin exchange trading funds, including: there are still a lot of human manipulation in the Bitcoin market, insufficient monitoring of the Bitcoin market, And the Bitcoin market has not yet grown to a large enough size.
But Hester Pierce expressed doubts about the above rhetoric. She expressed her frustration with the current practice of the US Securities and Exchange Commission and believes that they are using a wrong method to protect investors. The SEC appears to be less concerned with its own regulatory efforts and more interested in rejecting potential bitcoin spot and futures market offerings. The job of the US Securities and Exchange Commission is not to judge the merits of a certain transaction, nor can it play the role of deciding whether the exchange is good or bad. The job of the US Securities and Exchange Commission is to ensure the safety of investors and require all parties to abide by the trading rules. Which products to trade is entirely up to them to decide.
Additionally, in June 2020, New York asset fund firm WisdomTree Investments announced plans to create an exchange-traded commodity fund that would include up to 5% exposure to CME cash-settled bitcoin futures. The fund seems to be "playing around the edge", so some market participants believe that whether the fund can be approved will become a litmus test for whether the US Securities and Exchange Commission will allow the application of a bitcoin exchange-traded fund.
Hester Pierce, one of the cryptocurrency advocates, believes that it seems unlikely that the SEC will continue to throw out measures to hinder the development of the bitcoin market. She explained: I want to do it in a way that does not hinder people from introducing new products To establish a cryptocurrency regulatory infrastructure so that encrypted projects can eventually provide new products in certain areas, and also want to establish a framework for those encrypted projects to give it a try. Hester Pierce has been working hard to bridge the gap between the crypto industry and regulators. She designed a "cryptocurrency time limit exemption" policy, hoping to give cryptocurrency projects a three-year grace period in terms of regulation. Project developers will be exempt from U.S. federal securities laws during this time, freeing them to focus on building functional and decentralized crypto networks, but then they must determine whether their cryptocurrency transactions constitute a sale or offer of securities.
Not only that, Hester Pierce also proposed the concept of "safe harbor". She said that she would tailor the information disclosure requirements for cryptocurrency issuance projects according to actual needs, retain the applicability of the anti-fraud provisions of the securities law, and give cryptocurrency issuers the ability to attract users to participate in their networks. This means that, in addition to anti-fraud provisions, the distribution and sale of cryptocurrencies will not be subject to the Securities Act of 1933, and cryptocurrency issuance projects will also be exempt from registration under the Securities Exchange Act of 1934 to engage in certain cryptographic transactions. Persons who trade in currencies are also exempt from the definitions of "exchange," "broker" and "dealer" in the Securities Exchange Act of 1934, but the development team of a cryptocurrency issuance project must meet certain conditions to be exempt, such as information disclosure, etc.
Another U.S. regulatory agency: Heath Tarbert, the new chairman of the U.S. Commodity Futures Trading Commission, also pointed out that although the U.S. Commodity Futures Trading Commission has regulatory powers, the choice of regulatory approach is equally important. Principles-based regulation can in many cases provide a more effective regulatory approach to overseeing digital assets than rules-based “high-handed” regulatory approaches, and can ensure that the U.S. remains a global leader in fintech, which is important to America's future prosperity is critical. The best way to regulate the emerging market of digital assets is to be based on principles. Principles-based regulation means moving away from detailed prescriptive rules and relying more on high-level and broadly stated principles to set standards for regulated firms and products. Businesses then try to find the most efficient way to meet these criteria on their own. This regulatory approach can provide greater flexibility for the fintech industry, and it can also allow the US Commodity Futures Trading Commission to maintain a leading position in fintech regulation by responding more quickly to technological and market changes.
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Risk issues remain
Even though Bitcoin has many attractive attributes, for example, it is a decentralized currency, and it has been outside the global financial system for more than ten years. But investing in Bitcoin does have a number of associated risks, including: the risk of Bitcoin being manipulated by malicious actors or botnets; the risk of fraud, manipulation, and other wrongdoing in Bitcoin spot transactions; the absence of any government Recognize Bitcoin as legitimate fiat currency.
Bitcoin, like many similar cryptocurrencies, can be thought of as a virtual representation of currency/money, although this "currency" consists only of computer code, like regular currencies, they can be traded, transferred, stored online , and can even be exchanged for cash. But unlike traditional currencies, the "main life" of bitcoin and other cryptocurrencies are internet-based and protected by layers of computer code, and can be sent across international borders across the globe as easily as text.
It’s these factors that make institutional investors, regulators, and the U.S. government so nervous that they don’t seem to like this model of open finance, even calling it “Pandora’s box.”
Many hedge fund traders have confessed to being very concerned that Bitcoin may eventually be banned by the U.S. government. Because similar trading bans have indeed occurred in the United States, for example, onion futures and potatoes in Maine have been affected by the US government's ban. And as early as five years ago, Jamie Dimon of JPMorgan Chase said: If there is a real, uncontrolled currency in the world, then no government can tolerate the existence of this currency for a long time.
In fact, since Bitcoin's inception, the market has been widely circulated that Bitcoin will subvert US legal tender, and although it is somewhat dramatic, it is not impossible.
There is no doubt that cryptocurrency is an area that can create risks, but we need to understand what those risks are. The technologies used by bitcoin and other cryptocurrencies can be interpreted in many different ways, making it difficult for U.S. regulators and policymakers to decide what these are and how to treat them.
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Cryptocurrencies should be regulated as soon as possible
While cryptocurrencies may be the world's boldest financial experiment since the dawn of the internet, in Washington, administration officials have made it clear, both publicly and privately, that they don't see a clear path to cryptocurrency regulation and that they want it to happen as soon as possible. regulation.
The U.S. has long been known to have the ability to economically sanction, dismantle, and dismantle nefarious financial networks because such practices are critical to U.S. national security. Financial sanctions are generally safer and more effective than direct deployment of armed forces or diplomatic activity. The American Defense Foundation for Democracy claims that the United States is currently paying close attention to how China, Iran, Russia, and Venezuela develop cryptocurrency and blockchain technology, because this alternative payment system can allow many global business transactions to bypass US economic sanctions. At the same time, the American Democracy Defense Foundation also warned that blockchain technology may enable U.S. adversaries to operate outside the U.S.-led financial system for the first time and achieve innovation throughout the economy. This process may take two to thirty years, but These players are now developing the building blocks, and they envision a world in which cryptocurrency technology will help them surpass the financial power of the United States in the same way that the dollar once devalued the pound.
What is certain is that U.S. law enforcement agencies are actively and effectively using technological tools to solve these problems. They are in a more mature state than they were a few years ago. As the cryptocurrency worldview and people's awareness continue to strengthen, cryptocurrencies are gradually integrated into global finance. system and become part of that system.
It is worth mentioning that the current U.S. Congress has proposed more than 30 bills targeting cryptocurrency, which is also the largest number of bills ever proposed for a certain industry. In terms of other cryptocurrencies and blockchain technology, some bills focus on combating the use of cryptocurrencies for terrorist financing, money laundering, human and sex trafficking and other illegal activities.
Interestingly, disagreements have also emerged among US market regulators. Those disagreements include how far to limit the expansion of cryptocurrencies; whether law enforcement is waiting too long; and whether cryptocurrencies put America's financial dominance at risk at all.
SEC Chairman Jay Clayton is hostile to the crypto industry, saying he is close to declaring war on cryptocurrencies; another SEC commissioner, Hester Peirce, is Has become one of Washington's most prominent cryptocurrency advocates. Since joining the SEC in 2018, Hester Pierce has been providing institutional and retail investors with more access to Bitcoin and other crypto products. The U.S. Securities and Exchange Commission has repeatedly blocked encryption products from listing on national stock exchanges, a move that has also been criticized by Hester Pierce. Not only that, Hester Pierce also accused the SEC of rejecting a series of proposals to bring bitcoin products to the market. However, Hester Pierce also admitted that the past history of Bitcoin is not too good, but the problem is that these shadows have been shrouded for too long. Some dollar transactions are much easier.
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A big shift in investor attitudes
For all its ordeal, Bitcoin has not been wiped out. Instead, Bitcoin started to catch people's attention quickly and captured the imagination of scientists, traders, engineers, bankers, and futurists, helping them to continuously introduce innovative technologies.
San Francisco-based crypto industry venture capital firm Polychain Capital is also the industry's first $1 billion cryptocurrency fund. Joe Eagan, president of the fund, said that many investors are not aware of the many other applications of Bitcoin and blockchain, but simply see them as a "safe haven" for funds. People mistakenly think that Bitcoin is a traditional store of value. A disruptor, or an interesting hedge because Bitcoin is a deflationary asset. But in fact, the real beauty of Bitcoin and other cryptocurrencies is the programmable technology, but also has all the advantages of decentralization, which can be used to build many new technologies and implement large-scale disruptive innovations.
